NETHERLANDS GUIDE

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Home » Countries » Europe » Netherlands

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as the Netherlands – which is characterized by a productive and international workforce, complex employment and tax laws, a strong infrastructure network linking to the rest of Europe, as well as the title of Europe’s most competitive market, with leading sectors in agriculture, creative industries, energy, and high-tech systems and materials – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Netherlands – The Economy

The Netherlands can be defined as possessing one of the strongest markets in Europe, with its influence stretching throughout Europe and beyond. The Dutch economy has been highlighted as one of the most competitive in Europe and fourth most competitive in the world according to the World Economic Forum and 2020 IMD rankings, as well as fifth in the 2020 Global Innovations Index.

The Netherlands boasts a prosperous open economy, and is noted for its stable industrial relations, low unemployment and inflation rates, and a highly educated, diverse, and multilingual workforce.

Geographically, the Netherlands is ideally placed in the European continent, with 95% of Europe’s most lucrative markets reached within 24 hours by road from Amsterdam or Rotterdam. The country also benefits from a strong infrastructure of airports, railways, waterways, and ports that connects the country domestically and internationally. Rotterdam has the largest port in Europe, whilst Amsterdam’s International Airport is one of the largest in the world.

The country has had steady natural gas resources since 1959, upon the discovery of a wellspring – which accounts for more than 25% of all natural gas reserves in the European Union. The sale of natural gas generated a significant amount of revenue over the decades, but there are more sectors that contribute to the country’s resources.

The Netherlands also have their eyes on the future, embracing innovation, sustainability, and digitalization with the EU Innovation Scoreboard (2020) ranking the country as the fourth-best nation for innovators. The Netherlands is a main gateway to European talent for companies expanding abroad and as a magnet for business ventures from the United States, Australia, China, and India.

Small and Medium-Sized Companies

Small and Medium-Sized Businesses (SMEs) have a huge role to play in the Netherlands’ economy.

In 2019, it was recorded by the European Commission that the country’s SMEs accounted for 62.3% of the value added to the economy (‘non-financial business economy’), which is above the EU average of 56.4%.

SMEs also provide over 63% of all employment in the country.

CountryThe Kingdom of the Netherlands/Holland
CapitalAmsterdam
States/ProvincesFriesland, Groningen, Flevoland, Drenthe, North Holland, Overijssel, Utrecht, Gelderland, South Holland, North Brabant, Zeeland, Limburg
Principal CitiesAmsterdam, Rotterdam, The Hague, Utrecht, Eindhoven, Tilburg, Groningen, Breda, Nijmegen, and Almere
Language(s)Dutch
Local CurrencyEuro
Major ReligionChristianity
Date Formatyyyy-mm-dd
Time ZoneCentral European Standard Time (GMT +1)
Country Dial Code+ 45
Population5,823,516
Border CountriesGermany, Norway, Sweden, Poland, Netherlands
Tax Year1st January – 31st December
VAT %25%
Minimum WageNo national minimum wage; but approximately earn DKK 17, 000 per month ($2,647) or DKK 204,000 per year ($31,766) – gross pay.
Taxpayer Identification NumbersDanish Tax Number [ID Number] (CPR)
Danish Tax Number [Corporations] (CVR)
Danish Social Security Number (CPR)
Leading Sectorsagriculture, energy, wind turbines, shipbuilding and refurbishment, chemicals, food processing, textiles and clothing, electronics, wood products, construction, machinery and transportation equipment, steel, and medical equipment
Main importsCars, refined petroleum, packaged medicaments, crude petroleum, broadcasting equipment
Main exportsmachinery, transport equipment, refined and crude petroleum, broadcasting equipment, food, packaged medicaments, computers, office machine parts
Main trading partnersEU, UK, USA, China
Government TypeUnitary parliamentary constitutional monarchy
Current Prime MinisterMark Rutte

The Main Sectors of the Dutch Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

  1. Agriculture and Food – The Netherlands is one of the world’s largest exporters in agricultural and food products, even though it contributes only 1.5% of the country’s national GDP.
     
  2. Creative Industries – The Dutch Creative Industry has been strengthening in the recent years, gaining a strong reputation and international acclaim in areas such as interior design, gaming, and fashion. The annual turnover of these industries are over 7.1 billion euros.
  3. Chemical Industry – The country is also a leading European supplier of chemical products and services, with easy access to the required raw materials. The chemical industry turned over a respectable 52 billion euros in 2019.
  4. Energy – The Netherlands boasts a strong reputation in the areas of renewable energy such as wind farming and biomass processing, energy efficiency, as well as greenhouse farming. Energy provides a substantial contribution to the local economy, forming part of the services sector which contributes about 70% of the country’s GDP.
  5. High Tech systems and materials – Dutch high-tech industries are amongst the most innovative in the world, due to the country’s state-of-the-art facilities, and pioneering research and development. Dutch knowledge and products are sought after and exported worldwide. These industries benefit from strong government support, with over 2 billion euros being invested in R&D yearly.
  6. Horticulture – The Netherlands is the leading trendsetter and a global market leader in various aspects of greenhouse technology, such as flowers, plants, bulbs, reproductive material, and nutritional horticultural products. In 2018, this sector contributed about 21 billion euros to the country’s economy.
  7. Life Sciences and Health – The Dutch Life Sciences and Health sector competes on a global scale, due to strong links between industry and academia, focused clusters, and strong chains linking research to product and business creation. These industries also benefit from strong government support, with over 2 billion euros being invested in industry R&D yearly.
  8. Finance – The Dutch finance industries are leading the way in finance and Fintech, bringing traditional finance services into the future with tech innovation, research, development, as well as digital infrastructure. Amsterdam is also the world capital of green finances and ranks as the 2nd biggest fintech nation in the EU.
  9. Water – The Netherlands is also a world leader in water management, shipbuilding, and sustainable systems for water production, supply, and partial recycling of “used” water.

Compliance Highlights

  • The Dutch Tax and Customs Administration (Belastingdienst).
  • The Social Security Bank (SVB), which coordinates the Dutch social insurance systems – national insurance (for individuals living in the Netherlands), and employee insurance (for those working in the country).
  • The Employee Insurance Agency (UWV) – this operates under the Ministry of Social Affairs and Employment (SZW) and handles benefits covering such as unemployment and sickness.

Labor Contracts Law

When it comes to employment contracts, according to the law, all contract types must include the following information:

  • full details of employer and employee
  • employment location and employee’s role
  • usual working hours
  • start date of contract and end date if fixed term
  • salary and payment schedule
  • any probationary period
  • holiday entitlement
  • notice period

However, there are a number of different contract types, and each type also has their own rules to follow, which can be seen here:

Payroll – Tax Contributions and Benefits

  • National Income Tax:  Dutch residents are taxed on total income from all worldwide sources. Non-residents pay personal tax on income sourced in the Netherlands and usually fit into Box 1 of the three-tier Dutch system, which includes all income from salaries, bonuses, self-employment, and directors’ fees. Taxable income is subject to a 37.35% rate up to earnings of €68,507 (US$80,330) with a top rate of 49.50% above that.
  • Social Security Taxes:  National Social Insurance contributions are taken at 27.65% of employee salaries. Premiums are paid on annual incomes up to €33,791 (US$39,622) towards old-age pensions (17.9%), surviving relatives (0.1%) and long-term care (9.65%).
  • Sick Pay:  Benefits apply for the first two years of incapacity to work, paid either by the employer or via the Employee Insurance Agency (UWV). Sick pay is a minimum 70% of salary, including overtime payments and other personal benefits.
  • Paid Vacations: Full-time employees receive at least four weeks paid holiday annually. Holiday allowance is 8% of total gross salary, paid in May or over 12 months at the employer’s discretion.
  • Maternity Leave:  The allowance is four to six weeks pre-natal and 10 weeks after the birth. Employers apply to the Employee Insurance Agency (UWV) for the maternity benefit for their employee, who receives their 100% daily salary capped at €223.41 (US$261).
  • Health Care:  All Dutch residents must be covered for basic public health insurance (ZVW). Private healthcare is funded both by contributions from employees, starting at around €100 (US$117) annually, and from employers paying an amount that depends on employees’ salaries.

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